KARACHI, Jan 5: Four stock brokers — three members of the Karachi and one of Lahore Stock Exchange — were served final loss notices, by the National Clearing Company of Pakistan Limited (NCCPL), the managers of the CFS, to settle their outstanding dues.

Continuous Funding System (CFS) also called ‘badla’ represents shares bought on borrowed money.

The aggregate demand from the four members amounted to Rs160 million and the brokers were given notice on Monday to settle the sum “by one business day”.

NCCPL CEO Muhammad Lukman recalled that as a means to settle the CFS MK-II open position of Rs9.8 billion, an agreement was concluded for voluntary CFS MK-II square-up scheme by the stake holders i.e. SECP, Mutual Fund Association of Pakistan (Mufap), commercial and investment banks and members of the stock exchanges.

“The scheme was designed for the orderly squaring up of the CFS MK-II market and the underlying CFS Financed Securities along with associated margin eligible securities so as to minimise losses to the authorised financiers on their CFS financed positions and minimise the final losses to the financees”, the CEO of NCCPL said in a statement.

Under the scheme CFS financed securities and their associated margins were sold at a 12.5 per cent discount to the closing price as of Dec 24, 2008.

Accordingly, NCCPL circulated the modus operandi of the scheme to all CFS MK-II participants on December 26, 2008 wherein all concerned were advised to submit their consent, in writing on the prescribed format, to participate in the scheme latest by December 28, 2008.

Ninety financees and 65 authorised financiers participated in the scheme along with Government-owned Institutions (GoIs) — National Investment Trust, State Life Insurance Corporation and National Bank of Pakistan.

Authorised financiers who opted to be a part of the programme agreed to purchase CFS financed securities of approximately 30 per cent of the total value they had financed in the CFS MK-II market.

The NCCPL observed: “They will purchase only the shares they have financed together with shares deposited as margin against these shares. GoIs had also agreed to purchase an equivalent amount of exactly the same shares i.e. 50 per cent of the total quantity of CSF financed securities equally purchased by GoIs and authorised financiers”.